You chose to open your own electrical business so that you could be your own boss. And, you expect to make more money as well. So, how soon should your electrical business show a profit? The answer may surprise you. It does not have as much to do with how fast your business grows as with how you approach the principle of taking a profit! How is that? You know electrical work but are probably not a trained bookkeeper or accountant. One of the first things to do when you set up shop is to outsource your booking because doing so will pay for itself. What happens in virtually every start-up business is that expenses are not well controlled and eat up any potential profits. The other thing is that you really can allocate money to profit just like other costs of doing business. This approach is what the Profit First method of bookkeeping is all about.
Exigo Business Solutions is the top accounting firm in the Kansas City area. We work with established companies to help them maximize their profits and we work with new companies to get them started off out on the right foot. When you work with us, we don’t just tally up the numbers and give you long columns of numbers with totals at the bottom. Rather we use the best small and medium-sized business software, QuickBooks, to produce reports that you can use to identify where you have problems in your business and where there are opportunities that you can take better advantage of. The first important step is to have a professional set up your books and do the bookkeeping that keeps you on top of your cash flow, budgeting, and all expenses. This will, by itself, make your business more profitable than if you neglect this step. Then there is another thing you can do with your books that will make all the difference with how soon your business sees a profit.
The standard way that bookkeeping is done gets all of the numbers right but all too often disguises or hides the problems. We are used to thinking that we charge clients to make money, pay expenses, and then, maybe, have a little left over for owner’s pay and profits. At Exigo Business Solutions we use a better approach to doing your books. The numbers start out being the same but the end results are hugely different.
The Profit First approach takes profit as a habit instead of a distant dream. Start by tallying up money from clients and then allocate (subtract) profit which leaves you with all of the other expenses! This disciplined approach to the financial side of your business puts money into a segregated profit bank account. You will also set up accounts for owner’s pay, taxes, operating expenses, and other categories as needed. This answers the question, how soon should your electrical business show a profit.
You should show a profit the first month you are in business and bill a customer!
A common response at this point is for the business owner to say that money does not grow on trees and that Profit First seems to be creating profits out of thin air. But, the truth is that your profit in your electrical business or any small or medium-sized business comes from competent control of expenses, smart choices of customers, and the decision to make profit a habit instead of a wish.
When you follow the Profit First method you create financial discipline. First of all, you create a habit of putting money into the profit and other accounts on a routine basis. Then you use your outsourced accounting advisors to help you spot where there are expenses that you can eliminate or certainly handle more effectively. Which jobs are you taking at a loss? You can get rid of them if you can see the complete financial picture of each and every job.
All too often in a business, a given job takes longer than it needs to and the amount of money spent on a project tends to run up until it hits the budgeted amount. This is “Parkinson’s Law” and is the main enemy of business profits that Profit First deals with. When you use the Profit First approach, you start allocating profit and create profit as a habit. Then you take back financial control of your business by ferreting out unnecessary expenses and inefficiency that otherwise rob you of profits.
For more information about how outsourcing your booking and using the Profit First method will allow you to make profit a habit instead of a dream, contact us today at Exigo Business Solutions in the Kansas City area.